When the going gets tough, the tough intensify their efforts.
As other money managers cut back because of the stock market's drops and bounces, a number of other firms are adding to marketing and sales staffs, stepping up sales calls, adding portfolio managers and analysts, and beefing up their product development staffs to prepare for new products and services.
Among the companies adding as others are cutting: Diversified Investment Advisers, Purchase, N.Y.; SEI Investments, Oaks, Pa.; Principal Capital Management, Des Moines, Iowa; Boston Partners Asset Management LP, Boston; RS Investment Management, San Francisco; Fiduciary Trust Co. International, New York; Hartford Investment Management Co., Hartford, Conn.; and State Street Research & Management Co., Boston.
John Doyle, partner at the executive search firm Ray and Berndtson, Chicago, said about 20% of money managers are creating new positions. "The companies that are doing the strategic hiring now will have gained a significant market share at the expense of the companies that have taken a more conservative approach," he said.
Sales and marketing executives are in the most demand. "Nobody in the last 10 years has really had to sell," said Mr. Doyle. "Now in a much more competitive marketplace, you've got to get the rust off your selling skills."
Other hot areas: consultant relations and experience with foundations and endowments.
Roger Blackwell, professor of marketing at Ohio State University, Columbus, said well-funded money management firms have an opportunity to do contracyclical marketing when the economy slows down.
"Contracyclical marketing can be very effective," said Mr. Blackwell. "If they maintain their marketing efforts when competitors are cutting, that increases their relative share of voice." During an economic downturn, the psychology of buying changes more than the ability to buy, said Mr. Blackwell. "If you can affect psychology with effective marketing, that's an opportunity."
Major benefactors of a downturn are often smaller, privately held firms, said Mr. Blackwell. The smaller firms are able to find and afford the talented individuals that either are being laid off by larger firms or have become frustrated with cost-cutting measures. Also, he said, because of hiring freezes at many of the larger firms, top talent might migrate to smaller firms.
"The best time to attack is when everyone else is weak," said Joseph Masterson, vice president of sales at Diversified.
Diversified has increased its staff by 100 in the past 12 months and by about 36 since the beginning of the year. Thirty people were hired in information technology, many from dot-coms that went bust.
"The investment we make in technology ultimately will lower the cost of doing business," said Mr. Masterson.
Mr. Masterson said advertising levels have remained the same, but Diversified has stepped up its marketing efforts to broker-dealers. The firm has doubled its sales and marketing staff in the intermediary market, he noted.
SEI Investments has hired nine new sales people, three client service representatives and four marketing staffers this year. SEI President Edward Loughlin said the idea is to support the increased sales effort with additional marketing staff.
In an effort to increase visibility in a down market, Mr. Loughlin said SEI has beefed up its direct sales calling program. The result: twice as many sales appointments compared to the same period last year.
Mr. Loughlin said the new sales and marketing staff also will support SEI's efforts to expand into the endowment and foundation, Taft-Hartley and insurance company markets. More hirings are planned in product development and investment management as SEI prepares to launch new alternative investment portfolios, he said.
Principal Capital has been looking to build its market share by raising its visibility in the institutional marketplace. Principal recently launched a new advertising campaign and has increased conference sponsorships and attendance. Principal Capital also increased staff by 1% since the start of the fourth quarter of 2000, said Laura Jackson, head of human resources.
Boston Partners, a value manager, added four investment professionals in the last six months: two equity researchers; one equity trader; and one fixed-income portfolio manager. Desmond Heathwood, chief executive officer, said the firm will hire two more equity analysts and one credit analyst this year as well.
"The analysts in the portfolios add the basis points, and investment performance is what we have to sell," said Mr. Heathwood.
He said it's easier to find talented money managers in this market than it was in 1999 and early 2000. "It's a more realistic market for investment professionals," said Mr. Heathwood.
Randy Hecht, CEO of RS Investment Management, agrees. "If you're going to be able to find extremely high quality people to hire, your best opportunities are in market downturns," said Mr. Hecht.
In recent months, RS hired a new portfolio manager for the microcap team, two new equity analysts to support the growth equity team, and an institutional sales manager. All are new positions. Officials also plan to hire two to three more equity analysts.
As a small firm, RS can't afford to lure people away, so "we have to wait for periods of time when those people start to become available," said Mr. Hecht.
Messrs. Heathwood and Hecht both added that the independent and privately held nature of their firms has enabled them to take a longer-term view and be more flexible with regard to budgeting.
Fiduciary Trust has been beefing up its staff to prepare for when the market does turn around. "There's a strong opportunity to build when others are cutting back," said Henry Johnson, head of business development.
Fiduciary hired four product development and management specialists, with plans to develop investment capabilities and products now in anticipation of demand later. The firm plans to hire additional employees in product management and consultant relationships this year, he said.
"You can lose focus when budgets force you to make tough decisions," said Mr. Johnson. "We're trying very hard not to lose focus on the strategic priorities of the organization even in a difficult downturn."
Fixed-income money manager Hartford Investment Management has experienced steady growth since it entered the institutional market three years ago. So far this year, the firm has added five positions in investment management and four in sales and marketing. Andy Kohnke, managing director, said HIMCO is adding positions to accommodate its growth and build for the future. Executives also are using advertising, conference sponsorships and calling programs to increase the firm's visibility, he said.
State Street Research also has been in a hiring mode to accommodate growth, adding 56 positions to date in 2001, said Christopher Abbott, head of institutional marketing and client service.
"We see layoffs and hiring freezes at other companies as an opportunity," said Mr. Abbott. He said the fact that two-thirds of State Street Research's assets are fixed income and institutional helped the firm in this market environment.
Diversified and SEI, two large managers of managers, also are adding staff.
Banc of America Capital Management, Charlotte, N.C., also has been busy building staff, adding 140 last year and intending to hire another 200 in 2001 (Pensions & Investments, March 19).